Vice - Corruption

♪ SHANE: This week on "Vice," we send Ryan Duffy to China for a peek behind the facade of their booming economy. RYAN: We've walked around in this gigantic, gigantic building, and there's no one, there's absolutely no one here. SHANE: And then we go to Egypt, where the aftermath of Arab Spring is ripping the country apart. That is some *** strong-*** tear gas. [Coughing] ♪ SHANE: The world is changing. Now, no one knows where it's going. This is World War III. culture, and politics that expose the absurdity of the modern condition. RYAN: That little child has a huge gun. I've never seen anything like this before. It looks like hell on Earth. I was interviewing suicide bombers, and they were kids. SHANE: This is the world through our eyes. MAN: We win or we die! This is the world of "Vice." ♪ Hi. I'm Shane Smith, and we're here in the "Vice" offices in Brooklyn, New York. China is booming. Its economy has been growing with double-digit growth for the last 3 decades. In fact, it's estimated that China will overtake the U.S. as the world's largest economy in just 20 years, but what we don't know much about, though, is the health of that growth. There are signs that China is headed for the same kind of real estate collapse that rocked America in 2008, so we sent Ryan Duffy to see what the world's next real estate disaster might just look like. ♪ RYAN: Welcome to the face of China's real estate boom. Welcome to Tianducheng, China's fake Paris playground just south of Shanghai. Uh, replica Paris leaves a little bit to be desired, "a little bit" specifically meaning humans. What makes this copycat Paris interesting isn't just that it's a copycat Paris. It's that it's a completely abandoned copycat Paris used for little more than wedding photos and curiosity-seeking. Oh, yeah! OK, OK, OK, OK. RYAN: How'd you guys choose to get married here? It's not actually a coffee place. None of this is actually real. Ooh! This is weird as ***. So they decided to build this pretty impressive replica Eiffel Tower, which is a fine idea, and then they built all of these apartment buildings as far as the eye can see, which was also a fine idea until everyone decided collectively "We don't want to live there." Real estate has been a major growth sector for the Chinese economy, accounting for about 13% of the country's soaring GDP in recent years, but a lot of this construction has been wildly speculative. Sure the Chinese government counts these projects as growth, but the problem is that China calculates its GDP through property construction, not property sales. People talk about the property market's affect to China's GDP. It's true that 10 years ago China was more about an export-led economy, but nowadays, property, if anything, is the single most important factor to this. The property market is very much embedded in the whole part of the China economic growth. RYAN: All of this speculation has led to a glut in the market. There's simply way too much real estate inventory in China, and it's leading to problems like this 5-year-old, billion-dollar fake Paris with an occupancy rate of only 2%, and the problem's only getting worse. The simple supply-and-demand theory has been replaced by build now, sell later voodoo economics that's led to over 64 million empty homes and at least 11 massive, empty ghost towns across the country, places like the Kangbashi District of Ordos in China's Inner Mongolia. Kangbashi was built in 2004 with cost estimates as high as $5 billion, and it's a complete bust. Designed to hold 1 million people, it has a population of only 30,000. Meet Bater, a retired city court worker and one of the only cab drivers in a town that barely needs any cabs at all. So these are all really new buildings, right? What's gonna happen to all of these half-built high rises? There are buildings that are mid construction that are not just completely abandoned in addition to the ones that are done and also completely abandoned. Thank you. Kangbashi is a stunning sight, block after block of massive high rise buildings, some finished, most unfinished, and none with more than 2 or 3 tenants, a perfect location for a post-apocalyptic science fiction film, but apparently a really bad location for a city. So what's totally surreal is you walk around this city, and there are just endless developments where you see this on the outside and just grand designs and schemes, and you're like, "This looks beautiful. I'd love to live here," but then you just poke your head right behind the scaffolding, and it's so far from what they had planned. We talked to a local investigative reporter about how a real estate wreck this massive is even possible in modern China. ♪ [Wind blowing, scaffolding rattling] We're doing our own small sample size research right now. I'm gonna go ahead and call that one not lived in. So we've come down 4 floors now, and so far, no residents. Most of the doors are still boarded up. Oh. You want go down to the subfloors and see if there are amenities? What's your guess? Supernice spa room? I'm coming back here if there's a spa here. [Elevator dings] Creepy as *** coffin room? If that was your guess, you nailed it. We've walked around this place with impunity in this gigantic, gigantic building and a bunch of the neighborhood ones, and there's no one, there's absolutely no one here. We wanted to know how the hell someone sells apartments in a place like this, so we met up with a local real estate broker to get the pitch. This is like me at 4 A.M. every Saturday night. ♪ Pretty nice spread. If this apartment was in Manhattan, you'd be stoked. It looked like there are at least two filled residences over there, right? Was there ever any concern as this place was being built that, "You know, if you look around, "I'm not really sure this place is panning out. Should we maybe rethink this thing?" RYAN: We knew that there had to be some serious consequences to all of this failed construction, so we sat down with Jim Chanos, a prominent hedge fund manager, to talk about the current and potential fallout from these ghost cities. We began looking at China about 3 1/2 years ago, and we were trying to figure out how it was that the global commodities markets were doing so well in the teeth of the biggest recession in generations, and as we did more and more work, we realized we were looking at something that was pretty much unprecedented in terms of the scope and size of basically the world's largest construction site. At the end of '09, China had 5.6 billion square meters of property under construction. That equaled a 5'x5' office cubicle for every man, woman, and child in China. and basically local governments for very, very little compensation are seizing the land, bulldozing the homes that are on that land, and are then developing high rises. That's just simply a transfer of wealth, and the number is estimated to be as much as $5 trillion. RYAN: In Kangbashi, it wasn't hard to find people willing to tell their own stories of displacement as long as we agreed to keep their identities hidden. Even with nothing left to lose, they were still living in fear of the local government. [Sniffles] ♪ But it didn't stop there. Not only were the lower-class farmers essentially kicked off their land, but China's middle class has lost out, as well, investing in this real estate with increasingly bleak prospects of return. It's hard to overstate because at the peak of our bubble construction got to about 16% of GDP, about 1/6. It's been running at 50% in China now for 3 years, 3 times our level. Any entity that relies on a series of one-off transactions that are uneconomic in order to bolster the country's bottom line, not a company's bottom line, is headed for big trouble. RYAN: Making matters worse, China is still building massive projects that are destined to become ghost towns just like Kangbashi. In fact, a replica of Manhattan's financial district, Tianjin, is under construction right now. It's as if China either doesn't understand that these ghost cities are problematic for the world economy, or they're just choosing to ignore it. ♪ QIAN: China and the U.S. are more and more integrated than ever before, so if China's economy is going to crash, that's going to be bad news for American business. CHANOS: A few years ago, I called this economic model "a treadmill to hell," and I guess I would have to revise that by saying it's a bigger treadmill but same destination. ♪ Two years ago, Arab Spring caught the world's imagination. Young people rising up against dictatorial regimes quickly became a global media sensation, but as it turns out, the aftermath of revolutions tend to be very messy because once the dictators are finally ousted the resulting power vacuums can lead to even more chaos and more fighting. Egypt, for example, ousted long-time dictator Hosni Mubarak only to quickly find themselves under yet another autocratic regime. So once again, youth have taken to the streets as the revolution there continues. ♪ [Chanting in Arabic] Two years ago when revolution happened, people thought they were gonna have a better Egypt. They thought their lives were gonna improve, but instead of that, things got worse. Inflation went up, the economy went down, couldn't put bread on the table. What we're hearing is "justice or chaos." Every person that we've spoken to, no matter what group they're affiliated with, has lost people. [Sirens] ♪ They want to continue with the message that their friends were carrying before they were killed. [Chanting in Arabic] When Arab Spring hit Egypt, the world was inspired by a people overthrowing an oppressive dictator of 30 years Hosni Mubarak. The revolution was a popular uprising of different groups uniting for the same cause, but it cost 840 Egyptians their lives and injured at least 6,000 in the process. When the dust settled, the party most poised to rise to power was the most organized, the conservative Islamic group the Muslim Brotherhood. For over 30 years, the brotherhood was a radical Islamic organization considered too extreme by a succession of brutal dictators, so extreme they once counted Osama Bin Laden and his number two Ayman al-Zawahiri as members, but on June 24, 2012, Dr. Mohamed Morsi, the brotherhood's chosen candidate, won the country's first election by a margin of just 3.4%, but the honeymoon was short-lived. Just months after his election, Morsi granted himself sweeping constitutional powers, earning himself the nickname "Egypt's New Pharaoh." We wanted to understand exactly why everyone was so angry with the Morsi regime, so we sat down with Ahmed El-Naggar, an outspoken economist, whose books were banned by Mubarak. SUROOSH, VOICE-OVER: Making matters worse, this turmoil has all but killed tourism revenues and deeply worsened Egypt's financial crisis. SUROOSH: Nowhere is the rage at Morsi more concentrated than at Tahrir Square. [Chanting in Arabic] So this is anti-Morsi, anti-Muslim Brotherhood protest, demonstration. Basically they're saying, "Morsi's a liar, and he should get out now." The youth were at the forefront of the Arab Spring and again in this second uprising. Through both revolutions, Gigi Ibrahim has been one of their most vocal leaders. People are still out there on the streets because of anger, anger and injustice. Morsi came through elections. The first thing he did was give out a declaration that makes him have the legislative power, the judicial power, and the executive power. That's not democracy. We're seeing really a mockery out of this whole revolution. SUROOSH: Furthering tensions on the ground is the fact that Morsi has not reformed the dreaded Ministry of Interior, the security force Mubarak used to suppress protestors with extreme violence. [Sirens] Police attacked protestors in all different kinds of ways. [Shouting] The normal beating, dragging, stripping, torturing, raping, *** assault. Police target eyes. I think at least 3,000 people have lost at least one eye. The lack of justice and freedom are bringing people into the revolution even more. Freedom of expression is a right that we're fighting for because it's a right that we gained after the revolution that we would like to keep. The revolution didn't end after Morsi got elected. The revolution is continuing, and as long as the demands of the revolution have not been fulfilled, you'll always find people on the street. SUROOSH: The anger seemed everywhere, so much so that we couldn't even take the subway without running into another protest. [Horn honking] [Horn honking] SUROOSH: There was so much rage directed at the Muslim Brotherhood, so we tracked down their spokesperson Nader Omran to get their point of view. It's a bit troublesome for the past 1 1/2 year, but we--we are used to this, yes. We know it's not that easy. Egyptian people hasn't practiced democracy maybe ever So can you tell us what the vision is that the Muslim Brotherhood has for Egypt? We are a society which was formed to revive the Islamic vision, which can include all aspects of life, and now we have a chance to apply our vision in Egypt, which hopefully will be successful there. There are a lot of detractors from this, I think. People are saying, "Well, nothing's changed. "We had one dictator, and now he's been replaced with an even worse dictator." How does a government deal with a situation like that? Because when you go out to Tahrir Square or the presidential palace and you talk to the people, Exactly. Yes. Yes. Exactly. There were tens or hundreds of young people who are throwing Molotov cocktails into the presidential palace. It's unprecedented. For example, have you heard about the Black Bloc? Yep. The Black Bloc, for example, these are vandals. This is the point. I mean, it's not a matter of if you agree or don't agree. It's a matter of you don't have a specific, comprehensive vision of what you really want. It's like a child. Please ask them and tell them, "So what's after? What's after this?" There's no reply. SUROOSH: Egypt's Black Bloc is one of the most active groups of the post-revolutionary front. Their name is derived from the black masks and hoods popularized by Western protestors for years and adopted by Egyptians to conceal their identities since Arab Spring. ♪ So this is the martyr wall here. These are all the people that have died due to the revolution. We're gonna go meet with the Black Bloc right now. They are a group that's been labeled as terrorists by the government. They want us to meet them in an alleyway around the corner from here. No one really knows what their deal is. They're a bit of a mystery. ♪ All right, guys. Thanks for meeting us tonight. Can you tell me what the main mandate is for Black Bloc? Can you tell me about some of the sacrifices that you've had to make? SUROOSH: These kids have plenty of reason to be paranoid. Their friend Gaber Salah was only 16 in November of 2012 when he took his place on the martyr wall. ♪ So we're meeting with some of the protestors. They've agreed to show us essentially their lab where they make the Molotov cocktails and these homemade missiles in a strange building. Nice to meet you. Nice to see you. So what are some of the techniques that you guys use, and how do you fight? Basically, we don't have any heavy weapons. We just have the Molotovs. We need to win some field in the battle. Right, right. We're not terrorists. We are fighting for our rights, we are fighting for our country. And so this violence that exists in post-revolutionary Egypt, has it affected you and your friends and your families? Everyone has been affected. I've witnessed some of my friends being killed. They are martyrs. Martyrs, yeah. And that gives you even more motivation to fight, I assume. Yeah, so they didn't die in vain, yeah. SUROOSH: The Black Bloc informed us that they would be taking part in a massive protest that night. ♪ So we're right by the presidential palace. It's the two-year anniversary to the day When Hosni Mubarak stepped down, and what these people want is President Morsi to step down. [Chanting in Arabic] [Chanting continues] They're banging on the front door of the palace. Looks like they're trying to bust it down. Uh... Imagine if this happened in Washington, D.C., at the White House. People scaling the wall, smashing the front gate, and battling with the police. [Chanting continues] [Clattering] SUROOSH: So they start with water, and then what do they do? So this is the first wave of retaliation. Watch out! [Bell ringing] [Shouting Arabic] [Coughing] [Man shouts] [Horns honking] [Coughing] ♪ [Coughing] [Drums beating, horns honking] SUROOSH: That is some *** strong-*** tear gas. I feel like it just singed a layer of my skin off. [Sirens] [***] [***] SUROOSH, MUFFLED: The police are back. They're shooting tear gas, and they're about to switch to rubber bullets. [***] [Siren] ♪